Insurance is a minefield, but hopefully this will help.
Lifetime policies are the most expensive because they cover your dog for medical conditions for the whole of it's life. For instance, my 8 year old Cocker William was diagnosed with Dry Eye almost 3 years ago. It's a condition that he will have for the rest of his life. Because I have lifetime cover I can claim for the ongoing meds and check ups, plus any further meds or treatment that may be needed in the future, for the rest of his life.
Policies vary a lot in the amount of cover provided. Mine will pay up to £4,000 per year for each illness/condition. So if I needed £4,000 cover for one illness I would still be covered up to £4,000 for any number of other illnesses during the year. Some policies will have a limit, say £4,000, to cover all illnesses in one year.
Policies that don't provide lifetime cover will often offer cover up to a set limit for a condition. Using £4,000 as an example again, once that £4,000 limit has been reached they won't make any further payments for that condition. That sounds like a lot of money, but with a dog needing major surgery or having an ongoing condition that needs expensive meds or treatment, that limit can be easily reached and then you're left without any further cover for the condition ever.